TI reports financial results for 4Q08 and 2008

Texas Instruments Incorporated (TI) (NYSE: TXN) today announced fourth-quarter revenue of $2.49 billion, net income of $107 million and earnings per share (EPS) of $0.08.

These financial results include restructuring charges of $0.13 per share. Without the charges, EPS would have been $0.21, considerably better than the company's mid-quarter expectations. (See reconciliation table below.)

TI also announced it is making reductions in employment because demand has continued to weaken with the slowing economy. Employment will be reduced 12 percent through 1800 layoffs and 1600 voluntary retirements and departures. Charges for these employment reductions will be about $300 million. Annualized savings from these reductions, plus those announced in October for the restructuring of the company's Wireless business, will be about $700 million after all reductions are complete in the third quarter of 2009.

"We are realigning our expenses with a global economy that continues to weaken," said Rich Templeton, TI chairman, president and chief executive officer. "By reducing expenses now, we keep TI financially strong and able to invest for future growth.

"Most of the reductions will come in our internal support functions and non-core product lines so that a greater percentage of the dollars we spend will go directly toward developing and supporting Analog and Embedded Processing products. We believe these are the areas that will drive TI's future growth and allow us to achieve our financial objectives.

"We are not counting on a near-term economic rebound for improvement. The actions we are taking to reduce expenses and inventory will position TI to deliver solid financial results, even in a period of prolonged economic weakness. When the economy strengthens, we'll be pleased that we focused aggressively on our core product lines."

4Q08 financial summary

Amounts are in millions of dollars, except per-share amounts. Except as noted, financial results are for continuing operations. The sale of TI's former Sensors & Controls business was completed on April 27, 2006, and that business is reported as a discontinued operation.

TI's revenue declined 30 percent compared with the fourth quarter of 2007 and declined 26 percent compared with the third quarter of 2008. Revenue in all segments declined in both comparisons.

TI's operating profit declined 95 percent compared with the fourth quarter of 2007 and 93 percent compared with the third quarter. The declines were due to lower revenue and the associated lower gross profit in all segments, higher restructuring charges, as well as the impact of underutilized manufacturing assets. These more than offset other manufacturing cost reductions and lower operating expenses.

1. The decline in Analog revenue from a year ago and from the prior quarter
was primarily due to high-volume analog & logic. High-performance
analog revenue also declined in both comparisons to a lesser extent.
2. The decline in Embedded Processing revenue from a year ago and from the
prior quarter was primarily due to a combination of lower catalog and
automotive product revenue. Revenue from communications infrastructure
products also declined to a lesser extent.
3. Wireless revenue declined from a year ago and from the prior quarter
primarily due to lower baseband revenue.
4. Other revenue decreased from a year ago primarily due to declines in RISC
microprocessors, DLP products, royalties and calculators. Other revenue
decreased from the prior quarter due to the seasonal decline in
calculator revenue and lower revenue from DLP products, royalties, ASIC
products and RISC microprocessors.

Operating profit declined in all segments because of the effect of decreased revenue and restructuring charges. Restructuring charges were as follows:

The fourth-quarter 2008 restructuring charges of $254 million included $121 million for a portion of the actions just announced, $109 million for actions announced in October to re-focus the company's Wireless business and $24 million for asset impairments related to an action announced in 2007 to shut down an older digital factory.

4Q08 additional financial information

-- Net income includes a $67 million tax benefit from the reinstatement of
the federal research tax credit, which was signed into law in October
2008 and was retroactive to the beginning of 2008.
-- Orders were $1.86 billion, down 47 percent from a year ago and down 42
percent from the prior quarter.
-- Inventory was reduced by $200 million in the quarter. The company
expects to continue to reduce inventory in the first quarter of 2009.
-- Capital expenditures were $76 million in the quarter, a decline from
$181 million in the fourth quarter of 2007 and $197 million in the prior
quarter. The lower capital expenditures reflect restraints on spending
implemented by management during this period of weaker demand and the
lack of need for additional manufacturing capacity in the near term.
-- The company used $386 million in the quarter to repurchase 20.3 million
shares of its common stock and paid dividends of $141 million.

TI revenue declined 10 percent compared with the prior year primarily due to a decline in Wireless segment revenue. Revenue in the Other segment also declined for the year. As the year progressed and the global economy weakened, the decline in TI revenue accelerated and broadened to the extent that all segments declined from the year-ago quarter in the final quarter of the year.

TI operating profit decreased 30 percent in 2008 due to the decline in revenue and the associated lower gross profit, the impact of underutilized manufacturing assets and higher restructuring charges. These more than offset a reduction in operating expenses.

1. Analog revenue was about even as growth in high-performance analog
was more than offset by a decline in high-volume analog & logic.
2. Embedded Processing revenue grew due to increased revenue from
communications infrastructure and catalog products that more than offset
a decline in revenue from automotive products.
3. Wireless revenue declined due to lower baseband revenue. OMAP
applications processor revenue also declined.
4. Other revenue declined due to lower revenue across a broad range of
products, the effect of the sale of a DSL product line in 2007 and lower
royalties.

-- Capital expenditures were $763 million in 2008. Depreciation was $1.02
billion.
-- The company used $2.12 billion to repurchase 80.2 million shares of its
common stock and paid dividends of $537 million.

The EPS estimate includes $0.03 per share resulting from $50 million of estimated restructuring charges. EPS will continue to be impacted in the first quarter by costs associated with underutilized manufacturing assets as a result of lower demand and the company's continued reduction of inventory.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as TI or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements herein that describe the Company's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.

We urge you to carefully consider the following important factors that could cause actual results to differ materially from the expectations of TI or its management:

-- Market demand for semiconductors, particularly in key markets such as
communications, entertainment electronics and computing;
-- TI's ability to maintain or improve profit margins, including its
ability to utilize its manufacturing facilities at sufficient levels to
cover its fixed operating costs, in an intensely competitive and
cyclical industry;
-- TI's ability to develop, manufacture and market innovative products
in a rapidly changing technological environment;
-- TI's ability to compete in products and prices in an intensely
competitive industry;
-- TI's ability to maintain and enforce a strong intellectual property
portfolio and obtain needed licenses from third parties;
-- Expiration of license agreements between TI and its patent licensees,
and market conditions reducing royalty payments to TI;
-- Economic, social and political conditions in the countries in which TI,
its customers or its suppliers operate, including security risks, health
conditions, possible disruptions in transportation networks and
fluctuations in foreign currency exchange rates;
-- Natural events such as severe weather and earthquakes in the locations
in which TI, its customers or its suppliers operate;
-- Availability and cost of raw materials, utilities, manufacturing
equipment, third-party manufacturing services and manufacturing
technology;
-- Changes in the tax rate applicable to TI as the result of changes in tax
law, the jurisdictions in which profits are determined to be earned and
taxed, the outcome of tax audits and the ability to realize deferred tax
assets;
-- Losses or curtailments of purchases from key customers and the timing
and amount of distributor and other customer inventory adjustments;
-- Customer demand that differs from our forecasts;
-- The financial impact of inadequate or excess TI inventory that results
from demand that differs from projections;
-- TI's ability to access its bank accounts and lines of credit or
otherwise access the capital markets;
-- Product liability or warranty claims, claims based on epidemic or
delivery failure or recalls by TI customers for a product containing a
TI part;
-- TI's ability to recruit and retain skilled personnel; and
-- Timely implementation of new manufacturing technologies, installation of
manufacturing equipment and the ability to obtain needed third-party
foundry and assembly/test subcontract services.

For a more detailed discussion of these factors, see the text under the heading "Risk Factors" in Part II, Item 1A of the Company's Form 10-Q for the third quarter of 2008. The forward-looking statements included in this release are made only as of the date of this release, and the Company undertakes no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

About Texas Instruments

Texas Instruments (NYSE: TXN) helps customers solve problems and develop new electronics that make the world smarter, healthier, safer, greener and more fun. A global semiconductor company, TI innovates through manufacturing, design and sales operations in more than 25 countries. For more information, go to www.ti.com.